Fiscal Responsibility

The following links provide information on being fiscally fit:

• Money for a Rainy Day

• Spending Your Chapter’s Money

• Tips for Staying Within (or Under) Budget

• IAAP Treasurer’s eGroup

IAAP Headquarters is frequently asked what is a reasonable amount of money for a chapter or division to accumulate. This is an issue in some chapters or divisions where an unusually large “nest egg” has been built up through the years with no apparent intention to use it.

How much money should a chapter or division have? Part of the answer, of course, is determined by the size of the unit. However, a rule of thumb is to have no more than necessary for “front money” for the next year’s board to begin conducting business, and to ensure a smooth transition of business from one year to the next. Anything more is not only unnecessary, it can also distract the chapter or division from focusing on their real objectives – to provide education, elevate the profession, and promote the programs of IAAP.

When "rainy day" money builds to an excessive amount, the IRS can even become involved. IAAP is a non-profit association, and should only be accumulating an amount of money that can reasonably be construed to support its ongoing programs. The same rationale applies to chapters and divisions, which are administrative units of IAAP and have no corporate status of their own.

One suggestion is that non-profits calculate what percentage of the organization’s annual budget could be covered by the reserve. In the past, some organizations tried to keep as much as one full-year’s budget in reserve. Today, most organizations consider a much smaller proportion to be adequate.

In the case of IAAP at the international level, the organization’s reserves would cover about one-third of the annual budget. Applying this same rationale to the divisions means that if your division's budget is $6,000, your division's reserves would not need to be in excess of $2,000.

When excessive amounts are accumulated through the years, the division or chapter ought to challenge this situation. Ask why the money is being saved. How will it ever be used? Why isn’t the money being spent on the members of the chapter or division?

Frequently, divisions/chapters find that the accumulation of excessive funds creates other problems. Eventually, they start looking for new projects on which to spend the money. And frequently, these projects are not the kind of work the division or chapter was established to perform. Sometimes these projects even divert the leadership’s time and effort away from the things they should be doing – promoting IAAP programs and building and strengthening the membership of the division or chapter. After all, no program can be effective without a stable, healthy membership.

Division and chapter boards that find themselves in this position need to think “outside of the box.” How can the funds be used to promote the interests of the members and the association?

Ideas to consider include special membership promotions, incentive programs with appropriate awards and recognitions, or, adding a keynote speaker, or educational program to your division annual meeting or chapter educational seminar without increasing the registration fees. Consider a special leadership training session for the members, or even an image-enhancing educational program on the profession for the general public, without charge, as a “public service.”

Think about it. Only the bank that holds your money benefits from unrealistically large reserve funds. The money belongs to the members. Let’s be sure it’s being used in the spirit in which it was collected.

(from Chapter Leader’s Guide, Finance section)

A frequent question asked by IAAP members is how they may legitimately use their chapter funds. There are many misconceptions about this, and most center around the issue of what they supposedly "cannot" do.

IAAP is recognized by the Internal Revenue Service of the U.S. as a 501 (c) 6 nonprofit corporation. The issue that comes into play with regard to spending is usually the "personal inurement" provision which is intended to keep individual members of such associations from personally profiting from the organization's proceeds. As with most IRS issues, this is sometimes a gray area, and the key consideration is intent.

No chapter should be using its money with the intent of helping a certain member or members to personally profit. However, this is not to say that a chapter cannot give awards, recognition, incentives, gifts, or even money to members if it is earned through some effort which assists the chapter in achieving its stated goals as an organization.

If your chapter desires to recognize a member with some object of value for a service performed on behalf of the chapter, the organization, or the secretarial profession, it may do so as long as the recognition or award is reasonable and proportionate to the service rendered. The key phrase is "compensation for service rendered." In other words, if a member performs a service for the chapter, (which could include something as simple as bringing in a new member) then the chapter can compensate that member in a reasonable and proportionate way, just as they could for anyone outside the chapter. For example, it would be reasonable to give them a pin, a small gift, plaque, etc. It would not be reasonable to give them something of great value out of proportion to the service rendered. The Internal Revenue Code defines such a violation as an "excess benefit transaction," i.e., a situation in which the economic benefit to a member exceeds the value of the consideration received by the organization.

While it is not recommended that a chapter award a member with discounted dues, it is not illegal to do so, again, as long as the award is not out of line with the service performed for the chapter. Awards in the form of dues or cash are discouraged primarily because of the negative "image" they may create.

The key question in this entire area of discussion is "Will the expenditure of the money help the chapter to fulfill its stated purpose as an organization — by helping it to become stronger, last longer, or be a more viable force in the profession?" If spending the money helps your chapter to better perform its purposes as a not-for-profit organization, you have satisfied the most important criterion.

Another frequently asked question relates to the conduct of lotteries, drawings, etc., for fund raising purposes. Keep in mind that the laws regarding these types of activities vary greatly from state to state and province to province. Check with your state and/or provincial authorities before conducting such events.

Many chapters award scholarships to individuals for various purposes, usually for educational purposes. While many chapters exclude members from being eligible for such scholarships, that is a choice, not a legal requirement. So long as a member is treated impartially and follows the same criteria for eligibility as anyone else, there is no legal reason he or she cannot be eligible. However, every caution should be used to be sure that no partiality is shown to someone because of their affiliation with the chapter. If they are awarded the scholarship, the chapter should be prepared to demonstrate that the individual was the best candidate of those who applied or were otherwise eligible.§

• Always prepare a budget before you undertake any action.
• Know your limits.
• List all the resources you’ll need to successfully complete the activity. That includes money, time, buy-in from others, and alternative resources available to you. Some massaging may be required if you’re realistic.
• Now is not the time to underestimate. If you have to go to others to get exact or projectable quotes, do it. But don’t fool yourself by cutting corners at this stage.
• If you must error, error on the high side. Better to come in under budget than be surprised by an over budget.
• Determine which items are firm and cannot be pared down further.
• Look for areas where you could substitute a lesser quality without it being noticeable, negotiate for a WIN/WIN in-kind exchange rather than payment of money, or outright ask for free donations from supportive parties.
• Keep in mind: If you don’t ask, you probably won’t get it. Most people aren’t very good at mind reading.
• Ask others for what you want and need. Hone your negotiation skills.
• Identify a point where you could still pull out, canceling the activity, and lose less than you would going ahead with an unsuccessful outcome. Most projects have a point of no return. After that point, you’re stuck seeing it through, even if the outcome is guaranteed to be a money-loser.
• Consider getting a partner if costs are high and resources low.
• Keep looking at the numbers throughout the project. If you have an overrun somewhere, cut back in another place. Keep an ongoing balance.
• Treat project expenses like you would a checkbook. Deduct expenses as you go along. It gives you more control.
• Always be thinking of plan A, B, and C. Plan A is your ideal, B is a backup that will work for you, C is something you can live with. Don’t get fixed on one idea and refuse to look at alternatives that could work almost as well.
• After the event, do an analysis. Look at the projected and actual numbers. See what you can learn for next time.
• Make it a game to always come in under-budget. Compete with your-self. Learn how to do it better, faster, cheaper.
• Consider your budget as part of your credibility. Be accountable. Understand that as the budget creator, the buck stops with you. Be ready to stand behind your decisions.
• Learn to love the magic of numbers. For most of us, they are the score cards of life.